Sirius Pays Stern $83 Million Bonus

Credits Shock Jock With Boosting Subscriber Numbers

NEW YORK (AdAge.com) -- Looks like Sirius may have made the right bet when it recruited Howard Stern away from CBS.

One media exec wonders if the bonus paid to Howard Stern could have been better spent on an ad campaign.

Satellite radio's No. 2 player paid Howard Stern an $83 million bonus today for his assistance in delivering enough new subscribers to exceed Sirius's goal of 2 million subscribers.

Adds to $720M contract
It's a hefty sum in addition to the $720 million the talk titan has already pocketed from his five-year deal with Sirius that also includes stock options. But the bonus payout has at least one buyer questioning its value.

"If he was such a champion of industry and thought this was going to be the future, does he need to take this money?" said Rich Russo, director-broadcast, JL Media. "If they spent that $83 million on an advertising campaign it probably would've generated an extra 3, 4 million subscribers. If you did an $83 million buy, that's a good expenditure."

In fact, Mr. Russo said, if you do the math behind the Stern bonus, with an annual subscription averaging out at $144, Sirius could have theoretically given out 576,000 free subscriptions.

Come a long way
Sirius ended 2006 with 6 million subscribers, a good 1 million short of analyst expectations, following XM's 7.6 million base. Still, it's come a long way from the days when it signed Mr. Stern for a $500 million contract in 2004 -- at that point, Sirius had 600,000 subscribers. Mr. Russo said this is a good pace for Sirius, but could be better given Mr. Stern's name recognition and previous domination of the format.

"He is the No. 1 attraction there -- sports and everything, he's the guy," Mr. Russo said. "Unfortunately, he's still not the factor he was when he was on terrestrial. There's not as much buzz about him, not as many advertisers saying 'Hey, I want to get into him.' ... He was getting mainstream advertisers toward the end of the show. He's not getting those ultra blue-chip advertisers [at Sirius] just yet."

CORRECTION: An earlier version of this story incorrectly implied that Sirius CEO Mel Karmazin recruited Howard Stern to the satellite radio company. In fact, Mr. Stern had signed with Sirius prior to Mr. Karmazin's appointment as CEO.